What’s New for 2021 Tax Returns?
These are some of the changes and updates that affect your 2021 tax filing:
- Stimulus payments are tax free. If you received 3rd round Economic Impact Payment and your adjusted gross income in 2021 was less than it was in 2020 or 2019 (however the payment was calculated) you may be eligible for a recovery rebate credit
- Unemployment benefits are fully taxable. There is no exclusion from tax for 2021
- Distributions from Retirement Plans and IRA’s which were waived for 2020, must have commenced for 2021 by those who attained the required starting date or who have inherited IRAs. Age 72 is now the starting date. So, if you reached age 72 in 2021, you must take a distribution prior to April 15, 2022. For 2002, you will need to take the distribution prior to December 31, 2022
- If you took money for Covid related issues when Covid began, you must repay it within 3 years. Don’t forget to declare it on your 2021 return
- Basic standard deductions for those filing single or those filing married filing separately is 12550, Joint, $25,100 and for those filing as Head of Household it’s $18,800.
- Non-itemizers can deduct $300 or $600 on a joint return.
- If you are a sole proprietor or have an interest in a partnership, limited liability or S Corp, you may be eligible for a deduction of up to 20% of qualified business income. This deduction is a personal one, not a business deduction, and can be claimed whether you itemize or take the standard deduction.
- Business mileage rate is .56/ mile
- Child and dependent care credit is greatly increased and fully refundable. Qualifying expenses used to calculate are $8,000 for one individual and $16,000 for two or more qualifying individuals.
- Annual gift tax exclusions remain at $15,000 per done.
Pending tax changes (not passed as of December 2021)
- Increase in capital gains rate to 28%
- Increase top marginal tax rate to 39.9%
- We will keep you updated as we learn more ….